Reckless lending claim dismissed by the High Court

The High Court in Harrold V Nua Mortgages Limited [2015] IEHC 15 has again made clear that there is no tort of reckless lending in this jurisdiction and that it is not prepared to entertain 'fanciful' arguments by borrowers seeking to repudiate their loans.

The plaintiff claimed damages of over €1 million and a declaration that his mortgage was null and void due to alleged reckless lending by the defendant.  He also claimed that he was coerced into signing a mortgage agreement and that he was misled by the defendant in relation to the nature of the agreement and the source of the finance. He further claimed that the defendant was insolvent at the time of the loan, was in breach of licensing requirements, and had engaged in excessive securitisation and breached regulatory requirements.

The defendant sought an order dismissing the claim on the grounds that it failed to disclose any reasonable cause of action and was bound to fail.

The President of the High Court considered the decisions in Healy v. Stepstone Mortgage Funding Limited, ICS Building v. Grant, and McConnon v. President of Ireland and confirmed that there was no civil wrong of reckless lending in this jurisdiction.  He noted that the plaintiff had made a number of other broad allegations in relation to the lending practices of “various banks” and pointed out that such blanket allegations do not give rise to a reasonable cause of action, were bound to fail and should be struck out.

With regard to the plaintiff’s argument that the lender simply “created the alleged money out of thin air on a computer keyboard”, this was struck out by the Court as ‘fanciful’ and ‘completely devoid of merit’ and bound to fail.

The Court noted that regardless of how the money was allegedly ‘created’, it was not disputed that the plaintiff applied for the loan, drew down the loan, spent the funds and was undoubtedly a willing participant in the transaction. No credible evidence has been brought to the attention of the Court that the plaintiff was “lured into a contract” or that he was coerced or induced in any way to sign up to the mortgage agreement.

The Court was also satisfied that the plaintiff's contention that securitisation, alongside other fraudulent practices of the bank, amounted to a “policy of predatory targeting of customers with the long term goal of fraudulently acquiring valuable property at little or no cost" was frivolous, bound to fail, and should also be struck out.

With regard to alleged breaches of statutory codes by the bank the Court pointed out that non-compliance with a statutory code did not relieve a borrower from his obligations under a loan to repay the lender, nor did it deprive the lender of its rights and powers under the loan agreement.

The Court accepted that the jurisdiction to strike out proceedings is one which the Court should be slow to exercise however the Court was satisfied that the plaintiff’s claim disclosed no reasonable cause of action, was bound to fail and should be struck out.

For more information please contact Paula Mullooly, or your usual contact in A&L Goodbody.

Date Published: 27 January 2015